Cummins vs PACCAR Which Is a Better Investment?

Cummins and PACCAR are two leading manufacturers in the heavy-duty truck and engine industry. Cummins is known for its innovative and reliable engines, while PACCAR is a prominent producer of trucks and related products. Investors looking to capitalize on the growth potential of the transportation sector may consider comparing Cummins and PACCAR stocks. By analyzing their financial performance, market position, and growth prospects, investors can make informed decisions on which stock may offer the best investment opportunity.

Cummins or PACCAR?

When comparing Cummins and PACCAR, different investors may prioritize various metrics based on their investment strategies and goals. So, ask yourself what type of investor you are. This will guide you in determining which metrics are most important for your investment decision between Cummins and PACCAR.

Dividend Investors:

Dividend investors look for stable and growing income streams, using dividend metrics to assess potential investments. A company's dividend yield essentially measures the size of its dividend relative to the total market value of the company. Cummins has a dividend yield of 1.9%, while PACCAR has a dividend yield of 1.04%. Beyond the yield itself, considering the growth and sustainability of these dividends is also crucial. Cummins reports a 5-year dividend growth of 7.92% year and a payout ratio of 45.64%. On the other hand, PACCAR reports a 5-year dividend growth of 6.53% year and a payout ratio of 48.27%.

Value Investors:

Value investors focus on financial metrics to determine a stock's intrinsic value compared to its market value. The Price-to-Earnings (P/E) Ratio links stock price to a company's earnings per share, with Cummins P/E ratio at 24.05 and PACCAR's P/E ratio at 12.61. Another crucial valuation metric is the Price-to-Book (P/B) Ratio, which compares stock price with book value per share. Cummins P/B ratio is 4.89 while PACCAR's P/B ratio is 3.18.

Growth Investors:

Growth investors prioritize metrics indicative of a company's expansion potential. Focusing on top-line growth, Cummins has seen a 5-year revenue growth of 0.64%, while PACCAR's is 0.50%. Return on Equity (ROE) measures how effectively a company uses equity investment to generate earnings, with Cummins's ROE at 22.20% and PACCAR's ROE at 27.24%.

Retail Investors:

Retail investors often consider stock affordability and company familiarity. For example, day low prices are $365.83 for Cummins and $111.73 for PACCAR. Over the past year, Cummins's prices ranged from $226.53 to $387.90, with a yearly change of 71.24%. PACCAR's prices fluctuated between $90.04 and $125.50, with a yearly change of 39.38%. Brand recognition also plays a role, as familiarity with a company can influence investment decisions.